A large bakery buys sugar in 50-kg bags. The bakery uses an average of 1,344 bags a year. Preparing an order and receiving a shipment of sugar involves a cost of $135. Annual carrying costs are $630 per bag. The bakery operates 280 days per year. Lead time = 2 weeks. Determine the economic order quantity. What is the average number of bags on hand? When should the bakery order for more sugar? How many times per year will the bakery order for sugar?

Question

A large bakery buys sugar in 50-kg bags. The bakery uses an average of 1,344 bags a year. Preparing an order and receiving a shipment of sugar involves a cost of $135. Annual carrying costs are $630 per bag. The bakery operates 280 days per year. Lead time = 2 weeks.

  1. Determine the economic order quantity.
  2. What is the average number of bags on hand?
  3. When should the bakery order for more sugar?
  4. How many times per year will the bakery order for sugar?

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